Health Care Reform: You Asked, We Found Answers
We put your questions before four analysts.
Susan Dentzer, editor of Health Affairs and frequent NewsHour analyst, and Michelle Andrews, consumer columnist for Kaiser Health News, answered your questions about how the law will affect consumers.
For some questions, we got answers from two analysts on different sides of the debate over reform. Len Nichols is a healthcare economist at George Mason University and former head of the health policy program at the New America Foundation, which supports health care reform. And Ed Haislmaier is a senior research fellow in Health Policy Studies at the conservative Heritage Foundation.
Carrie Case: Will I be able to get health insurance on the exchange even if my work offers a plan? I can get insurance through work but it isn’t that great. I would prefer a better plan and preferably from a non-profit insurance company.
Michelle Andrews: Anyone will be able to buy health insurance on the state-based exchanges that will begin operating in 2014. But only people who meet certain criteria will be eligible to receive a subsidy to help cover the cost.
If your company offers health insurance that covers at least 60 percent of your health care expenses on average, and your share of the premium is less than 9.5 percent of your income, you won’t be eligible for subsidized coverage on the exchanges. You can still choose to buy a plan there, but you’ll have to pay the entire premium.
There’s another way you may be able to get some financial help purchasing a plan on the exchanges. If your share of the premium for your employer’s plan is between 8 percent and 9.8 percent of your income, you may be eligible for a “free choice voucher.” This voucher would allow you to use the money that your employer would have paid toward your coverage to buy a plan on a health insurance exchange instead.
Salvador Bigay: My friend’s mom was just declined this morning for insurance for a pre-existing condition, what can they do now? I thought this health reform was going to make it bit easier to get insurance even with pre-existing conditions?
Mike de la Paz: How do I direct patients with a pre-existing condition through the proper channels so they can get the insurance they need?
Michelle Andrews: Under the health care overhaul, insurers can no longer turn down children under age 19 who have serious medical conditions. Starting in 2014, insurers will be prohibited from turning anyone of any age down for coverage because they have pre-existing conditions. At that time, people who buy their own coverage on the individual market — where insurers currently reject applicants because of health problems large and small, from cancer to backaches — will be able to buy insurance through state-based “exchanges” that will take all comers.
Until that time, the law created Pre-existing Condition Insurance Plans that are now up and running in all 50 states. These insurance plans accept people like your friend’s mom who’ve been denied coverage because they have a pre-existing condition. They provide comprehensive coverage and limit out-of-pocket spending to $5,950 annually.
Premiums vary by state, but the plans can be pricey, costing several hundred dollars a month. That may at least partly explain why only about 12,000 people had signed up as of February. Another potential sticking point: You have to have been uninsured for at least six months in order to qualify for coverage.
Diana What will be the maximum out of pocket expense per year for individual plans? What would be the maximum premium per month for a single individual in his or her mid-30s of approximately $35,000-40,000 income per year? What does the best individual plan cover? Does it cover everything once the premiums are paid? Are there any restrictions for legal aliens who have lived in the country for more than 10 years?
Michelle Andrews: Beginning in 2014, the maximum amount that people will be responsible for paying out-of-pocket for coverage will be tied to the limits for health savings accounts, currently $5,950 for individuals and $11,900 for families. This will be true for plans sold on the health insurance exchanges as well as those sold on the private market.
Premiums for plans sold through the exchanges have yet to be set, but in general people with incomes up to four times the poverty level may be eligible for subsidies to help cover the cost. The amount of the subsidy will vary by income; someone making between 300 and 400 percent of the federal poverty level ($33,000-$43,000 in 2011) would pay a premium equal to 9.5 percent of her income.
All the plans sold in the exchanges will provide a comprehensive package of “essential health benefits” that include coverage for hospitalization, drugs, emergency care and outpatient services, among other things. The difference between the four categories of plans that will be offered — labeled bronze, silver, gold and platinum — is in the cost-sharing that individuals will be responsible for. People with platinum plans, for example, will pay 10 percent of their benefit costs, while those with less-expensive bronze plans will pay 40 percent of their costs.
Legal residents won’t face any restrictions on health insurance coverage, but undocumented immigrants won’t be permitted to buy coverage on the health insurance exchanges, nor are they eligible for Medicaid coverage.
David B. Nelson: As far as I can tell, this legislation is about health insurance reform. Is there any prospect for health care reform, and in particular for health care cost containment?
Susan Dentzer: It’s an exaggeration to say that the Affordable Care Act is about health insurance reform only. Among other items, major provisions of the legislation will expand coverage to an estimated 32 million Americans; launch a range of health care delivery system and payment reforms designed to improve the quality of health care and reduce costs; make major new investments in preventive health care to reduce disease; and expand the health care workforce, in part so that care can be provided to more people who will become insured.
With respect to cutting costs and improving the quality of health care, the delivery system and payment reforms are the initiatives to watch. For example, the Centers for Medicare and Medicaid Services will soon release regulations governing a new model of care delivery known as Accountable Care Organizations, which are supposed to be up and running by January 1, 2012. These will take on the role of providing care for a population of patients who are on Medicare and Medicaid at a sharply lower rate of cost growth than is currently prevailing in U.S. health care. When these ACOs save money, they’ll split the savings with the government, and thus will be able to funnel some of the savings into improving care.
In anticipation of these ACOs, many similar contracts are now being signed in the private sector between health care organizations and insurers. A large hospital system in Illinois, Advocate, recently struck an arrangement with Blue Cross Blue Shield of Illinois under which it will grow its costs by no more than the rate of growth of the Consumer Price Index. That will be less than half the rate of typical cost growth for most of health care. There is great hope that, as we see ACOs and other payment and delivery reforms flourish, we will be able to get health costs under better control.
Mike: I have a “flex” health savings account that is a pre-tax payroll deduction. I formerly bought generic fish oil capsules to lower cholesterol. It’s cheap and for me, effective. Now I’m told that these accounts are being discontinued. Also, now a prescription is needed for almost everything, leading to calls and confusion with the doctor’s office and the pharmacy. What is the value of these changes? Who benefits from these changes?
Worried: I’ve have heard that FLEX benefit plans are being cut back from the current $5,000 annual max. for a couple. If true, this will really hurt my wife, who is on permanent disability for MS, as every year she maxes out the $5K joint FLEX benefit I get through my work for the co-payment cost of her treatments not covered by insurance. I read that the reform supporters passed this cutback because they claimed only a “small percentage” of people ever use the full $5K. Did it never occur to them that that “small percentage” might represent people most in need such as those on permanent disability?! If this is all true, how can they justify reform on the backs of the disabled?
Susan Dentzer: A health flexible spending arrangement (FSA) allows employees to be reimbursed for medical expenses from accounts that they create with pre-tax contributions of their own or in conjunction with contributions from employers. Under the Affordable Care Act, non-prescription medicines (other than insulin) do not qualify as an expense for FSA purposes as of January 1, 2011. However, if your doctor writes a prescription for you, even for an over-the-counter item like fish oil capsules, you can still be reimbursed for those expenses by your FSA. Just ask your doctor for a prescription for them and you’ll be set. Insulin, even if purchased without a prescription, is not affected by this change, nor are some other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. Similar rules are also now in effect for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
Another big change will come in 2013, when, under the Affordable Care Act, a new federally-mandated cap of $2500 goes into effect on FSA contributions from employers. Up until this point, contributions have been unlimited, although a typical FSA plan contribution can be as much as $5,000 annually. Members of Congress may have said they passed this change because relatively few people would be affected by it, but the reality is that two bigger reasons drove the change. First, FSA contributions are considered by economists to be tax-advantaged spending, since employees can contribute to them on a pre-tax basis, and most economists believe that tax-advantaged spending encourages people to spend more on health care and drive up health costs as a consequence.
Second, as should be obvious, anytime you can avoid federal income tax, as you can by putting a portion of your salary into an FSA, you send less in the way of revenues to the government. Members of Congress who voted for the Affordable Care Act sought to capture a portion of those now-lost revenues by putting a new ceiling on FSA contributions. Similarly, they also imposed a new excise tax on very high value health insurance plans. These types of measures are designed both to capture more tax revenue to be spent on other purposes — such as providing subsidies to lower-income people to help them buy health insurance — and to restrain the rate of growth of health spending by eliminating at least some tax-advantaged health spending.
It’s regrettable that this will affect people like your wife with MS. Unfortunately, this is just one of the many trade-offs inherent in the health reform legislation, and an example of the ways in which Congress sought to expand health coverage for many people without breaking the bank. On the plus side, of course, the legislation will also prevent all insurers from ever holding pre-existing condition restrictions against people like your wife, with severe chronic illness. It also sets up the CLASS Act, a new long-term supports and services program that will allow people to contribute to it while they are healthy and working, and in turn, to be eligible for daily cash payments to purchase home care or meet other needs should they become disabled one day.
Guest: How does the health care reform deal with limited access issues for people with Medicare and/or Medicaid? What good does having coverage for more screenings under Medicare do if no provider will see you? Will there be an erosion of the Medicaid benefit as states must add more people to the rolls? States are already slashing benefits due to increased enrollments as it is.
Len Nichols: PPACA increases Medicaid physician payments to Medicare levels for primary care, which in most states will significantly increase providers’ willingness to accept new Medicaid patients. Despite contrary rhetoric and political drama, Medicare does not have measurable access problems, primarily because Medicare patients are important elements of most specialists’ practices and income statements.
The envisioned Medicaid coverage expansion in 2014 will require states to increase their spending on Medicaid an average of 1.4 percent above baseline spending projections over the decade ending in 2019, in exchange for a 27 percent increase in enrollment over that same period. The bulk of new financing is from the federal government. Still, this will require states to increase funds devoted to Medicaid, and that will not be easy politically, since few politicians have ever been honest with the people about what it costs to take decent care of the poor.
Access, however, should be far greater than now, since today providers receive very little payment from the uninsured for the care they get, and post-2014 the newly insured will at least be able to generate Medicaid rates for providers. In the long run, cost growth in both Medicare and Medicaid is driven by the increase in per capita costs that plagues our entire unsustainable health care system. There are basically two approaches to contain long run cost growth: (1) cut both benefits and payment rates substantially and tolerate rising amounts of uninsured, underinsured, and denials of care; (2) re-align incentives so that providers thrive by lowering cost growth while raising average quality. PPACA creates a bevy of tools that make it possible to follow the second strategy. Repeal of PPACA will leave us with only the first option.
Ed Haislmaier: Little in the legislation is likely to increase provider access, and what little improvement occurs will be marginal and restricted to relatively few locations. In contrast, the reductions in provider payments under Medicare and Medicaid, as well as some of the new provider regulations and restrictions in the legislation, could significantly reduce access. These changes will induce more providers to stop participating in those programs, or to limit their participation to only existing patients. New Medicare or Medicaid patients will have greater difficulty finding participating physicians.
This will principally be an issue with respect to physicians, as it is more financially realistic for a physician than a hospital or a nursing home to decline Medicare or Medicaid patients and still have a successful business model.
In the case of Medicaid, the legislation requires states to maintain their current eligibility levels. As a result, states will be forced to instead consider dropping optional benefits or cutting physician payment rates to achieve any savings they need to keep their budgets in balance.
Doxielady: So how is this health reform going to affect me — I am retiring at age 68. Is the health insurance I have now going to pull the plug on me?
Ed Haislmaier: Because you are already above the age of Medicare eligibility (65), when you retire Medicare will become your primary coverage and your current private plan will no longer cover you. That would have happened had you retired a year ago, too. The new legislation changed nothing in that regard.
However, depending on where you live, you may now have fewer Medicare Advantage plans to choose from. The legislation reduces payments to those plans. Indeed, some insurers have already announced that the will no longer offer Medicare Advantage plans. Other insurers may continue offering Medicare Advantage plans, but respond to the payment reductions by no longer offering “extra” benefits (such as vision or dental care), or by increasing patient co-pays.
Len Nichols: Reform makes Medicare more secure for the long haul by using incentive realignment to enable us to preserve and even add to benefits over time (better drug coverage, preventive care, etc). Rising health care costs have caused retiree health insurance to be eroded for years, until fewer than one-third of all firms offer it today, compared to double that percentage 20 years ago, so you probably shouldn’t count on that being there forever. Firms and current workers will sacrifice retiree benefits to preserve health care for active workers. Thus you should care a lot about Medicare solvency — see my answer above. The paths to solvency are: (1) benefit and payment cuts, with attendant loss in access; or (2) substantial incentive realignments so that providers gain from being more efficient as well as higher quality on average. This is mostly about coordinating care better, so that there are fewer unnecessary hospitalizations and tests while improving the likelihood of the right care for you the first time. PPACA creates tools and payment reforms that give us a fighting chance at (2). Repeal leaves us with (1) alone. You will have a clear choice when you vote in 2012.
NewsHour: You’ve been following the law’s first year of implementation — the provisions that have gone into effect already and the bumpy ride it’s had in the courts. After watching these things, what is your biggest concern for the coming year?
Len Nichols: My biggest concern for 2011 is that people have confused disputes over health reform tactics with the much larger philosophical debate about the size of government, and that confusion is getting in the way of natural mid-course corrections during implementation and the adult conversation we need to have.
We are either gonna figure out how to realign incentives so that we can make quality health care affordable and accessible for all Americans, as we implement PPACA in the uniquely American way we have always done big things, at different speeds and in different ways in different parts of our large and diverse country, OR we are gonna give up and retreat in to the false comfort of changing nothing, but wake up fairly soon and re-discover what those of us who study the health care system already know: We cannot afford the system we have built, and soon we could be forced to deny an ever-increasing fraction of our fellow citizens access to our health care table of plenty.
To reform health care the right way, we need all hands on deck, across the ideological spectrum, but instead we’ve had nothing but denial and distortions from the opponents of comprehensive reform since the summer of 2009.
What impresses me is how many health care system leaders — hospital CEOs, physician leaders, health plan CEOs, nursing leaders, etc — get it and are willing to lead. What disappoints me is how many important national Republican politicians get it, but are afraid to deviate from their party’s line of attack, attack, attack. What scares me is how scared roughly half the American people are of a reform package that is designed to improve the quality and affordability of the care they will someday need.
We need to be honest with each other: this bill is not perfect, but it is a good start. Health care costs too much, and many of our fellow citizens need help affording decent access. Reform can be improved with some Republican ideas like malpractice reform and budget fail-safes (i.e., link coverage expansion with realized savings). But Republican ideas can’t get in the mix unless that party’s national leaders admit this problem merits some government involvement and unless they join the conversation as partners, not ruthless antagonists. Health care, like our environmental, educational, and macroeconomic shortcomings, cannot be solved with an 18th century scope of government. Yet no one seems willing to tell the people that in clear terms. We’ve got to somehow channel the leadership from outside Washington into Washington before it’s too late for us as a great nation.
Ed Haislmaier: The legislation’s major provisions don’t take effect until 2014. Until then, the biggest concern is that the new insurance regulations already put into effect will increase premiums and induce insurers to exit the market. Thus, even before 2014, individuals and businesses are likely to face higher premiums and fewer choices.
Smaller insurers and those with other product lines — such as life, property or liability insurance — are the most likely to exit the market over the next several years. Look for them to sell their health insurance book of business to large, for-profit “pure play” health insurers such as United, Aetna or Wellpoint.
With respect to premiums, even large, self-insured employer plans are reporting a two to three percentage point increase in plan costs for the current plan year due to the legislation’s new benefit requirements. That price increase is on top of what would have occurred without the legislation.